Purchases of new U.S. homes increase by most in six months

Purchases of new homes in April rose the most in six months, as buyers responded to falling mortgage rates.

The 6.4 percent increase, to a 433,000 annualized rate, came after a revised 407,000 rate for March, which was larger than initially estimated, the U.S. Commerce Department reported on Friday.

The April gain reflected a surge in the Midwest and South. But there was a decline in the Northeast, and the West was flat.

Declining borrowing costs and greater employment opportunities are lifting the prospects for an industry that has been struggling to build on gains from last year. A pickup in construction that puts more properties on the market and slows price gains would help improve affordability and attract buyers.

"The deep freeze is over, and I think we can expect new home sales to continue to rise," said David Berson, chief economist at Nationwide Insurance in Columbus, Ohio, who had projected a 432,000 rate of April sales. "It's better; it's still not strong."

Estimates for April home sales ranged from 395,000 to 460,000, after a previously estimated 384,000 pace a month earlier. New-home sales, which account for about 7 percent of the residential market, are tabulated when contracts are signed, making them a timelier barometer than transactions on existing homes.

Stocks held gains after the report, with the Standard & Poor's 500 closing a bit more than 0.4 percent higher on Friday.

Closings up, too

Earlier figures from the National Association of Realtors showed a 1.3 percent rise in closings on sales of previously owned homes. Closings typically occur a month or two after a contract is signed.

A bigger supply of properties helped lure buyers, the data showed. The number of available properties climbed to nearly a two-year high, helping slow price appreciation.

Yet, the existing-home sales figures included signs of underlying softness.

Investors continued to play a big role in the market, the April increase was driven mainly by purchases of condominiums, and the share of first-time buyers was little changed.

Lower limits on loans guaranteed by the Federal Housing Administration are also a hurdle for the industry.

Friday's Commerce Department report showed the median sales price for a new house declined 1.3 percent from April 2013, to $275,800.

The increase in demand last month was led by a 47.4 percent spike in the Midwest, to an 84,000 annual rate. Purchases also climbed 3.1 percent the South.